InSight

Exit and Growth Strategies for Middle Market Businesses

CFA | COVID-19 Financial Impact, Assessment and Strategy Tool

By Peter Moore | Apr 16, 2020

The Crisis in Business Context

While the health crisis is the threat the Coronavirus holds over each of us, the business consequences are financial and often felt before anyone’s health has been compromised by the virus. Our economy relies upon cash flowing from one person and organization to another, and another, and another and so on. This “cash flow” circulation throughout our entire economy, when  measured is the “velocity” of money. The faster it flows the more robust our economy becomes. Most of our business economic arrangements depend on the basic trust of each party to a transaction, no matter how small the sale or how large the contract. This trust is shaken right now because of the uncertainty of our businesses and our livelihoods. The Federal Government’s job with stimulus funding is an attempt to restore the trust that helps to keep our economy going. Let’s all try and do our part and keep the cash flow moving.   See: What Is Money Velocity and Why Does It Matter?

The worksheets on the following two pages provide a way of looking at your company’s situation through the lens of your financial statements – both balance sheet (your financial condition at a point in time) and your income statement (your financial performance over a period of time). Looking closely at each line item of your own unique financial statements provides an orderly way of considering what and where you may be able to positively impact your own financial circumstances. Can you reduce liability, collect on assets owed to you, reduce an expense, and eliminate some overhead? All of these you’ve probably already looked at somewhat, but as circumstances continue to change it might be helpful to look even more carefully by visiting this worksheet for your business and your home situation too.

The purpose of the worksheet is simply to provide an objective way of looking at and assessing your company’s financial situation. The intended result is that you have a more complete set of strategy and action steps you can take over the next days and weeks to remain a viable company and position yourself to thrive once again when the cloud of COVID-19 goes away.

This tool is intended for business owners, accounting managers, controllers, and CFO’s looking to work with their office teams in a simple organized manner.

For assistance in completing a more detailed company assessment please contact your closest Corporate Finance Associates advisor by logging into www.cfaw.com.

These are trying times for just about every business on earth today. If you can keep your composure, keep your cool, and be objective in your assessment, you may find some special opportunities for your business to survive what we all hope is temporary and short lived.  While this is happening start to look at your business in a new way. Consider making permanent positive changes to reduce overhead costs, having more employees work from home and lease less office space, or reduce travel expenses by encouraging more Zoom video conferences, and less face to face meetings. The small amounts add up fast. You can use the savings to improve earnings or use the savings to reward employees or pay for group benefits for everyone.

Another opportunity is to look at what else you can do for your customers that won’t cost you more but for which you could charge them more. The concept is to look for ways that you can “charge more but cost less”. This means you get a higher margin for the product or service you deliver, but you do it in way that your customer avoids an expense (costs them less) so you charge them more but not more than the savings they experience. You have to think this through a bit but usually those opportunities do exist.

An example would be formatting finished product packaging so your customer won’t need to re-package a product. They save by not buying more materials, avoid a waste handling situation and saving labor time costs. You work with to help identify their costs, you increase your margin, and both parties benefit. Another way is to format digital accounting data, invoicing and product delivery, to be compatible with their inventory and accounts payable systems, which will save your customer money in the handling process and save them money by being more accurate on inventory and accounts payable. If you can achieve this with little or no cost to you but save the customer measurable amounts of labor costs and reduced errors, you can charge more and they will most likely pay more for the benefit. This does, however, require that your sales team gets to know the customer’s company more intimately, and that often leads to even more business opportunities.

To learn more about other ways to save business expenses or improve your customer pricing please contact us at www.cfaw.com  for the nearest Corporate Finance Associates advisor to you.

Good luck and best wishes to all of our customers, colleagues, and collaborators across the country. We will get through this best by helping each other raise our confidence to succeed.


3 Responses to “CFA | COVID-19 Financial Impact, Assessment and Strategy Tool”

Leave a Comment